Last Update: October 2014
Commentary on the recent development of price indices
In September, FAO’s three price indices for the oilcrop complex have fallen by between 3–5 percent. The indices for oilseeds and vegetable oils declined by 8 and 5 points respectively, thus continuing the slide observed during recent months, while the price index for meals has fallen by 10 points, after the slight rebound observed in August. All three indices continue to fare at multi-year lows, although the meals index remains at a historically high level.
International prices for oilseeds and oilmeals eased mainly on the prospect of large soybean availabilities during the forthcoming 2014/15 season. In the United States, record yields are expected to boost production, possibly allowing domestic inventories to leap to an 8-year high. Furthermore, given that relative prices continue to favour soybeans over maize, record soybean plantings are expected in Brazil and Paraguay (where sowing operations have just started) and in Argentina (where planting should get underway later this month). The prospect of global soybean supplies climbing to an all-time high this season, caused soybean quotations to tumble to the lowest level in 4 years. A slowdown in soybean imports by China also contributed to the drop in prices. Weakening import demand is attributed to the combination of ample supplies and flat demand for meal, which has driven processing margins in China into negative territory. Developments in the world’s rape and sunflowerseed markets also contributed to the slide in oilseed prices. Regarding rapeseed, in the EU, output is reported to have outpaced last year’s record, while in Ukraine production should be just shy of last year’s top level, thus guaranteeing a comfortable supply outlook in the region. As to sunflowerseed, global production is forecast to remain slightly below last season’s all time-high, but overall availabilities are still anticipated to be ample – most notably in the Black Sea region.
With regard to the additional drop in the vegetable oil price index, palm oil remains the main driver: abundant palm oil production combined with sluggish import demand continued to keep the level of inventories high in Malaysia and Indonesia, which caused palm oil prices to drop to 5-year lows. Interestingly, in September, palm oil values weakened considerably less than in August (–5% compared to –10%), a development that can be attributed to recent improvements in demand – as consumers started responding to low prices – as well as to efforts by Malaysia and Indonesia to stimulate shipments via temporary export tax waivers. Furthermore, some industry officials expect production in Southeast Asia to slow down in the coming months as palms are expected to respond – with the habitual time lag – to the prolonged dryness experienced in the first half of the current year. With respect to other vegetable oils, the decline in soyoil prices has come to a halt in September, amid reduced soyoil export availabilities in the United States and Argentina – in part due to rising demand from biodiesel producers.